BNY Mellon taps distressed debt
Thursday, 3 July 2008 12:45pm
Struggling telecommunication companies, bankrupt banks, airports under duress - the sub-prime crisis has increased the number of distressed debt companies, providing more opportunities for the Mellon Recovery Fund.
Launched in August 2006, the Mellon Recovery Fund returned an annual 9.6 per cent in earnings against the benchmark 0.3 per cent.
Given the timing of the launch in 2006, which was in an environment of historically low and still declining default rates, Mellon Global Alternative Investments (MGAI) designed the fund to incorporate a full cycle approach.
The credit crisis offered more opportunities to invest in debt trading at distressed levels, and the fund is expected to generate profits regardless of the near term market environment.
According to Derek Stewart, managing director of MGAI, another key differentiator of the Mellon Recovery Fund lies in the relationship of MGAI with its fund managers.
“Because we've been in the HF industry in the last 15 years, our relationships with managers that are investing in this area are fairly solid. We've got an intimate knowledge of their proceedings [and] there are 63 that are in our research system dedicated to doing distressed investing," he said.
MGAI also practices an active management approach to the fund's investments.
“With all of the groups we invest in we require direct access to key decision makers, and a certain level of ongoing monthly transparency to know what we're investing in.
“It's very different from other fund of funds, which are usually one step removed from the process," said Stewart.
Ruth Liew
